We know that New Mexico’s two biggest public retirement systems are sliding toward insolvency. The Educational Retirement Board is looking into a $5.9 billion abyss between its assets and the benefits it will have to pay. The Public Employee Retirement Association faces an even bigger gap of $6.2 billion.
Those numbers will probably get bigger as new information comes out.
To find solutions, the Legislature in 2011 created the interim legislative Investments and Pensions Oversight Committee, chaired by Sen. George Muñoz, D-Gallup. It dutifully heard testimony and introduced bills, but there was little consensus. Curiously, the PERA didn’t even offer a plan.
“I can’t figure out why people don’t want to fix the problem today instead of every single year kicking it down the road because at some point we’re going to be in so much trouble. That’s my biggest fight,” Muñoz said during the last session.
Lately, we’ve seen a greater sense of urgency and real momentum. The news is that the committee and unions have approved plans from both the ERB and PERA.
The ERB plan would reduce employee contributions from 11.15 percent to 10.7 percent and raise state contributions from 9.15 percent to 13.9 percent, according to information submitted to the committee. The ERB also proposed a new minimum retirement age of 55; and, for future workers, deferred start date of some retirement benefits. The committee clarified that the changes would not apply to workers earning less than $20,000 a year.
The plan bears some resemblance to a compromise measure introduced by Sen. Stuart Ingle, R-Portales, which would have set a minimum retirement age of 55 as of July 1, 2022, reduced the cost-of-living adjustment paid to retirees 65 or older, and increased employee contributions over a five-year period and employer contributions over a six-year period. The COLA is something of a sacred cow, and the Senate Education Committee stripped the COLA reductions from Ingle’s bill, along with the minimum retirement age.
The PERA board in June proposed scaling back retirement benefits for current and future employees, increasing contributions by both employees and government, and limiting retirement eligibility for future workers. It too was supported by unions.
News of these approvals doesn’t mention the challenges of getting 15 unions and retiree groups to sign off. Because last session unions harpooned some of the measures, the legislative committee probably understood that this is the best deal they could expect.
The unions’ positions can’t be dismissed as posturing. They’ll try to protect employees, yes, but one thing we heard often during the last session was that retirees had made plans and decisions based on the state’s promises, and the state couldn’t just change the rules mid-game.
Let’s not forget that we wouldn’t even be in this fix if financial wizards far from here hadn’t totaled the economy, although the Legislature was slow to respond. As the funds’ earnings shrank, their costs were climbing. Lawmakers kept improving benefits (it’s more fun to give than to take away), and workers retired younger and lived longer. Even though lawmakers have increased state and employee contributions, it wasn’t enough.
Gov. Susana Martinez thinks both plans lay too much of the burden on taxpayers. Her new spokesman says she has offered to work with legislators to find a solution. There’s probably room for compromise, but she doesn’t acknowledge the significant compromising already accomplished. Muñoz also points out that cities carry more of the burden than the state.
And then there’s the emotional debris from the nastiest and most expensive election campaigns New Mexicans have ever seen. Compromise will probably be scarce, but the abyss grows as we argue. Says Muñoz, “We have to get this done (in the next session) or we’ll have to come back in a special session.”
Sherry Robinson/NM News Service